Struggles Faced by Second-tier Banks in Financing Kazakhstan's Small Businesses
Insufficient Financing Reported by the Bank of Kazakhstan
Small and medium-sized enterprises (SMEs) in Kazakhstan face hurdles when seeking financial support from second-tier banks. Here are the primary issues:
- Scarcity of Capital: SMEs frequently encounter challenges when accessing financing due to stringent lending conditions and high-interest rates. Economic volatility and restrictive financing landscapes can intensify these difficulties.
- Reliance on National Bank Policies: The foreign exchange market can be unpredictable, and second-tier banks often count on the National Bank of Kazakhstan for financial stability and currency sales to sustain their functions. This can adversely affect their liquidity and lending capacity.
- ** Competition with Larger Banks**: Smaller banks or fintech startups may struggle to compete with bigger banks, which have more resources and sometimes acquire fintech companies to enhance their services.
To tackle these challenges, possible solutions are being discussed or implemented:
- Guarantee Funds: Two guarantee funds have been introduced with the objective of supporting SMEs and significant projects. By minimizing risks for lenders and increasing capital availability for smaller businesses, these funds can promote a healthier financial ecosystem.
- Collaboration with Fintech: Banks can harness fintech to improve services and boost efficiency, resulting in increased competitiveness and better SME support.
- Policy Support: The National Bank's flexible exchange rate regime and open practices can help stabilize the market and aid second-tier banks in their lending activities.
- Diversification of the Economy: Encouraging diversification of the economy can reduce dependence on specific sectors, making it easier for SMEs to secure funding across various industries.
These approaches are designed to strengthen the financial environment for SMEs and enhance the ability of second-tier banks to deliver essential funding.
Insights from Beisen Zholdybekov, Deputy Director of the National Chamber of Entrepreneurs "Atameken":
- SMEs are facing issues such as insufficient funding and a prolonged approval process, which leads to both financial and moral losses.
- To address these issues, the chamber of entrepreneurs proposed allowing clients with a poor credit history to receive preferential lending within a three-year time frame if they meet the financing conditions and their payment capacity is confirmed.
- Banks are willing to consider projects from such clients, but only after the debt is settled, there is appropriate collateral, and their payment capacity is confirmed.
- The bureaucratic process for approving loans and the preparation of documents according to bank requirements can take from 3 to 8 months. The chamber of entrepreneurs stressed the importance of timely consideration of entrepreneurs' projects to minimize discouragement in utilizing state programs.
- In the midst of Kazakhstan's small businesses seeking financial support, the industry often encounters difficulties in obtaining capital from second-tier banks due to stringent lending conditions and high-interest rates, as well as competition with larger, more resourced banks.
- To boost the ability of second-tier banks to provide essential financing to small businesses, policy initiatives like the implementation of guarantee funds, collaboration with fintech, and diversification of the economy are being introduced, aiming to foster a healthier financial ecosystem for SMEs in Kazakhstan.
